Distributed generation facilities such as microgrids are growing fast to support the local demand in rural and urban areas. A microgrid is a group of distributed energy resources within clearly defined boundaries that acts as a single controllable entity with respect to the grid. As the name suggests, microgrids are highly independent power subsystems comprising of diverse generation technologies that associate with the load. The microgrid operators are capable of investing in new technologies, applying demand management to the load, and selling the spare energy to the nearby utility company. A microgrid can contribute to the generation portfolio, carbon emissions and load curtailment subtly.
In a parallel trend, energy from renewable sources is becoming one of the most requisite energy, and the environmental policies are being implemented to encourage renewable energy investment. The utility company is usually the first entity to comply with the environmental regulations. However, restricted to the availability of resources, for instance, wind farm requires a large rural area, the utility company may find it difficult to accomplish the regulations. Another barrier is that the investment cost of renewable energy is much higher than other sources of energy. One of the possible ways of compensating the cost of renewable energy is to set up an energy market, in which the utility company can buy the energy from the market and microgrid operators can sell the energy in the market. The electricity price can be a form of compensation. The energy market formed by the utility company becomes a platform to promote renewable energy from microgrids with different characteristics. For example, some microgrids are rich in wind while other microgrids may have favorable sunshine most of the time. Promoting renewable energy is a long term mission. Therefore, long term investment planning of microgrids is critical to maintain economic and environmental sustainability.